US | Jackson Hole memo: Don’t fear the taper

Powell’s speech did not materially alter the outlook for Fed policy, but it did clarify the distinction between the timing of tapering and rates lift-off. The bar required for raising the Fed funds rate was increased a notch, allaying market fears of a repeat of the 2013 “taper tantrum” episode.

What you will learn:

• Foreigners turned to net buyers of US Treasuries with the onset of the Covid-19 pandemic.
• We expect the immediate post-Jackson Hole environment to be positive for risk sentiment and, with above trend growth expected to last well into 2022, we still expect yields to grind higher from here, albeit slowly.
• The mention of inflation suggests a level of concern that goes beyond an acknowledgment of its elevated rate, but we do not believe it will affect the decision making of key FOMC members